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State Grid interested in acquiring energy assets in Spain: report

By Chen Dujuan (Global Times)

08:04, July 03, 2012

State Grid Corporation of China, the country's government-owned power grid operator, is interested in acquiring two Spanish energy companies, Spanish newspaper El Mundo reported Monday, citing Spanish government sources.

However, the Spanish government is reluctant to sell grid operator Red Electrica de Espana SA and gas grid operator Enagas SA for their strategic importance, although it believes the Chinese firm would make a good offer for the two companies, El Mundo said.

The Spanish government holds a 20 percent stake in Red Electrica and a 5 percent stake in Enagas, the report said.

State Grid made no comment by press time Monday when reached by the Global Times.

It is a good time for Chinese enterprises to go overseas and make acquisitions as the European nations are suffering from sluggish economy and many companies are short of funding due to the eurozone crisis, Han Xiaoping, chief information officer of Chinese energy portal china5e.com, told the Global Times Monday.

Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, also believes that it is easier and cheaper to buy overseas firms during the economic downturn.

"Meanwhile, the overseas electricity market offers bigger profits because domestic electricity prices in China are tightly controlled by the government," Lin told the Global Times Monday.

Lin said the return on assets of State Grid is only 2 percent to 4 percent, far less than that in countries where prices are market-driven.

"However, bigger returns also mean bigger risks," he said, noting that Chinese enterprises need to assess the risks, including the company operations and local economies.

The cashed up Chinese power firms have been actively making acquisitions in the past years.

State Grid bought electricity transmission assets in Brazil from a Spanish company in late May and reached a deal in February to buy a 25 percent stake in Portuguese power grid operator Redes Energeticas Nacionais SGPS SA, following other buyout deals in Brazil in 2010 and the Philippines in 2009.

State Grid was also in talks with the US power firm AES Corp to buy a controlling stake in its US wind energy business.

The eurozone crisis has prompted a number of privatizations of Sate-owned assets and buyers in Asia Pacific, including Chinese entities, have replaced Europe to lead the power industry mergers and acquisitions in 2011, global audit firm PwC said in a report in May.

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